download-3I didn’t quite understand how desperate life can get until I helped someone facing bankruptcy.

I felt almost as powerless as Fran (name changed to protect her privacy), as she was about to lose everything and there were no avenues to help her.

Fran had only one credit card debt for $8000. She received a couple of letters and because things were tight leading up to Christmas she paid the mortgage instead. Suddenly her debt was accelerated (meaning, the entire amount owing on the credit card is called in) and she now owed $8,000, due immediately, rather than her arrears of $160.

A cleaner in her mid 60’s, Fran had a disabled husband with early onset Alzheimer’s disease, and lived outside of Adelaide in a suburb we later discovered was just outside the areas that could be approved for rescue finance.

When Fran could not find the $8000 quickly she was served with a creditor’s petition. The court case was to be held in Brisbane. She rang the court telling them about her disabled husband, her work commitments, her animals that needed to be fed, and her inability to get to Brisbane from Adelaide at short notice.

The court told her she could speak to the judge on the day of the case. She understood she could represent herself by phone but the judge on the day simply told her that the paperwork seemed to be in order and rubber stamped her bankruptcy. Job done. Fran was bankrupt. A private trustee was appointed (rather than an AFSA appointed trustee) and Fran’s debt of about $16,000 by this time, jumped to $95,000 over the next couple of months resulting in all the equity in her home being bled dry.

Every time Fran raised enough funds to pay the debt the private trustee added more fees putting her just out of reach of settling her debt with the trustee. Private trustees charge huge fees for small things like receiving phone calls, photocopying and filing, so by the time they forced the sale of Fran’s home, all the money went to them, after paying Baycorp around $16,000.

Once Fran was bankrupt she became completely powerless. The trustee ran her life. The Ombudsman services would not assist her to hold off the sale of her home. The bank who gave her the credit card wouldn’t help. The debt collector who bankrupted her could only discuss Fran’s case with the trustee’s permission. The trustee would not co-operate, perhaps because they often work together with the debt collector and are set to gain a huge amount in fees. And every phone call I made to them cost Fran more money.

So Fran lost her home and became homeless. Based on defaulting on one credit card debt of $8,000, and not one other debt.

All it took was a bad patch in Fran’s or any of our lives – no work, an illness in your family, a divorce, a separation – to spin your life out of control into bankruptcy

The $100,000 equity she had built by cleaning people’s houses over a lifetime was gone.

So, if you are in debt or mortgage distress get help quickly because there is so much that can be done while you still have power over your financial situation. Don’t leave it until a bankruptcy notice arrives and it fast becomes too late.